B of A Tracks Customs of P2P Users As Banks Ready To Take On Venmo

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More than 70 percent of people surveyed recently think that children now under age 10 won’t be writing any checks to pay their debts when they grow up—even when the folks they owe are close friends or family members.

It’s not that the majority in that poll believe we’re raising a generation of deadbeats or severely impoverished people. Instead, they think kids not yet 10 will never learn how to write checks, because those paper oblongs will be replaced by mobile transactions including person-to-person payments, according to the results of a survey commissioned by Bank of America.

That’s one gauge of the pace of adoption expected for person-to-person, or P2P payments—the quick way millennials and other adults are chipping in their share of a restaurant tab, for example, just by pulling out their smartphones at the table. Bank of America has a close interest in the rise of this method, as one of the 20 banks that have agreed to adopt the Zelle app to facilitate the transfer of funds directly from one person’s bank account to another’s.

To repay a friend, Zelle users can just select an e-mail address or cell phone number from their smartphone contacts list. “You put in an amount, and off you go,” B of A payments strategy executive Mary Harman says.

Wells Fargo, Chase, and U.S. Bank are among the other banks and credit unions that have joined the Zelle Network, which is coordinated by fintech company Early Warning Services. The partnership is developing Zelle as a means to compete with the established P2P app Venmo, operated by PayPal.

But will all those adopters of Venmo, founded in 2009, switch over to Zelle? Venmo handled $17.6 billion in transactions in 2016, up 135 percent compared with 2015, Bloomberg reported in February.

Bank of America implemented the Zelle app in February, with two main goals. First, the bank is always looking to improve its mobile banking offerings, Harman says. Second, P2P payments can replace cash, checks and other paper formats that cost the bank money. Those costs range from stocking ATM machines with cash to operating teller windows, she says.

What’s more, she says, “There’s still a lot of bank robberies.”

Before joining the Zelle Network, B of A launched a predecessor P2P app called clearXchange, operated by Early Warning, five years ago. The bank moved $8 billion through its existing P2P channels in the first quarter of 2017, Harman says. The bank’s hope is that Zelle will attract broader participation in mobile P2P transactions.

Javelin Strategy & Research clocked nearly $500 billion in P2P transactions in 2016, concluding that more than a third of U.S. consumers used the P2P payment route last year with a mobile device or other online connection. In the same report in February, Javelin predicts that by 2021, half of American consumers, or 129 million people, will have used a P2P service.

Bank of America sees that conversion well on its way in the survey conducted online from March 20 to April 1, 2017 by independent market research company Convergys. Among all 1,005 adults contacted, 36 percent used P2P payments. Among millennials—defined as people between 18 and 34, the figure was 62 percent. Gen Xers (age 35 to 52) followed at 34 percent; Baby boomers (age 53 to 71) were at 20 percent; and 10 percent of seniors over 72 used P2P services.

Looking at the subset of people surveyed who don’t already use P2P payments, 45 percent reported that they plan to do so within months.

The survey also delved into the social patterns and motivations behind adoption of the new payments technology. The B of A-commissioned survey queried a separate panel of 407 people already using P2P payments. A large majority (68 percent) were sold by its speed and convenience, and nearly half said they were influenced by their peers.

There also seems to be an etiquette emerging among P2P payments participants, according to the survey. For example, 53 percent of these users say they expect those who owe them money to make P2P payments within 24 hours, and 22 percent narrowed that down to one hour.

More than half of those 407 users surveyed say it’s socially acceptable to expect a P2P payment for amounts as little as $5 or less. The full survey results are laid out in the latest version of Bank of America’s Trends in Consumer Mobility Report.

In addition to Bank of America, Wells Fargo, and U.S. Bank have already begun to adopt Zelle features. Those functions will expand as the other banks in the network come on board later this year, Harman says.

Harman makes a case that Zelle has advantages over Venmo.

“Zelle will be available to anyone with a bank account, not just those who sign up for Venmo,” Harman says.

Transactions will be faster on Zelle, where funds go directly from one person’s account to another’s, she says. “The money moves in real time,” Harman says. A person who receives a Zelle payment could immediately spend the money with their debit card or withdraw the cash from an ATM, she says.

But Venmo is taking steps to match that instant availability of transferred funds by the middle of this year, Bloomberg reported.

The research firm Javelin says the adoption of voice interactivity in mobile banking apps will be a factor in the P2P competition, noting that PayPal has announced plans to pair its Venmo app with Apple’s Siri.

Zelle will have a voice-activated digital assistant called Erica, Harman says.

Early Warning Services announced April 17 that financial institutions in the Zelle Network processed more than 170 million P2P payments last year, representing a total of $55 billion in transactions. The 20 financial institutions in the network include those that utilized the predecessor to Zelle, the clearXchange Network. Those 20 banks and credit unions alone could extend the reach of the Zelle Network to 85 million consumers, Early Warning says.

Harman expects that most banks will eventually be part of the Zelle Network. But shortly, people will be able to exchange funds through the app—even if their bank isn’t part of the network—-by joining as individuals.

“They could take a picture of their debit card, and enroll,” Harman says.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy